Nokia Lumia sales up but not by enough

Nokia handset sales fell short of analyst expectations in its second quarter results, prompting fears that Windows Phone may not have been the right choice for the company.

Nokia shipped 7.4 million Lumia smartphones in Q2 – up 32 percent compared to the first quarter, not to be sniffed at. But analyst estimations in a Reuters poll were at 8.1 million units.

The Group had gross cash of €9.5 billion by the end of the quarter and net cash of €4.1 billion. Nokia Siemens Networks contributed gross and net cash of €2.5 billion and €1.4 billion respectively.

NSN drove profitability for the fourth consecutive quarter, with the company ending with an operating margin of 5.3 percent. Nokia CEO Stephen Elop said in a statement the company’s recent decision to buy out Siemens‘ 50 percent stake in NSN should “create value for Nokia shareholders”.

Feature phone shipments dropped to 53.7 million, a decline of four percent.

Ex Microsoft man Stephen Elop was brought in to Nokia to inject some Redmond wisdom. Other Nokia executives at the time, aware its own operating system, Symbian, was faltering, considered Android as an option but ultimately went with Windows Phone.

Since, the company has put out a series of well received Lumia phones and splashed serious money on marketing. But Windows Phone as an operating system has lacked the app ecosystem and cool factor required to win over consumers. It was always up against tough competition: iOS established itself as an early leader and Google responded by making Android available to any company interested in mobile. Microsoft was late to the party and compared to its rivals it had just not seduced enough developers to make the OS appealing.

There is little incentive for iPhone or Android users to make the jump to Windows. Existing customers risk losing their personal investments in their current OS of choice, including cash purchases. Nokia’s big hope was to scoop up a large number of first-time smartphone buyers, but many are opting for cheap Android devices instead.

Nevertheless, Elop noted Lumia sales were at their highest in any quarter so far, and predicts more success in the third quarter.

“We expect that our new Lumia products will drive a significant part of our smart devices revenue,” Elop said.